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3 Hidden Qualities of a Great Cash Flowing Property
Finding a profitable investment property with excellent cash flow potential is the dream that every investor chases after. For many, that dream becomes a reality because they know exactly what they’re looking for. They know what qualities a property must have for it to produce maximum cash flow. Location is a big one, of course, and so is school district and the quality of the property. But there are other, lesser known factors that also contribute to a property’s profitability. Here are the hidden qualities that are commonly overlooked that you should absolutely be checking for when considering a potential investment:
- Standard floor plan. Floor plan may not be something you’ve given a lot of thought to, because as long as the basic rooms are there, it’s all good right? Well, no. If you have to walk through the master bedroom to access the only bathroom, that can be a problem. A standard floor plan is always the best way to go with a rental property, because that’s what most people like and expect. They want a living room, a kitchen, a dining room, and the desired number of bedrooms with closets and bathroom access. If any of these are missing or they’re laid out in an awkward fashion, it’s going to turn people off. Consider the layout and flow of a property, and if it’s just too funky, set your sights on something else.
- Amenities. Ask your this: what does your property have to offer tenants that other homes in the area do not? If you can’t answer this question, you may be lacking in the amenity category. A great cash flowing property will have a number of attractive amenities that will keep your vacancy ratio low. Things like in-house laundry, central AC, a fireplace, private parking and oversized closets are just a few items that won’t be found with every rental. So, if you find a property that does have them, that’s a bonus for you.
- Expenses. Know what can eat away at your cash flow faster than you can say “where’d all my money go”? Expenses. When you’re looking at a new potential investment, you know about all the standard expenses: mortgage if you financed your purchase, property taxes, insurance, maintenance, etc. But what about those less common or even unknown costs? I’m talking about the potential for increased insurance fees, legal and administrative costs, vacancy or unpaid rent, bad tenants, and tricky tax situations. All of these can pop up, which can put a serious dent in your bottom line. Make sure you’re familiar with local tax codes and ready to handle any of these unexpected expenses, or your cash flow will take a hit.
Cash flow is all about money coming in minus money going out; what’s left is your cash flow. Obviously, the more money you have coming in and the less you have going out, the better your cash flow and the more in your pocket at the end of the day. Before you buy a property, carefully examine the cash flow potential. Look for qualities like the ones above that are going to make your property just a little bit better than the competition or will in some way result in a bigger bottom line for you.
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